Trajectories matter: A study of interfirm technological convergence and alliance formation

We introduce technological convergence to capture the similarity in two firms’ historical trajectories in the knowledge space and distinguish it from technological overlap that is grounded in the static and ahistorical conceptualization of firms’ knowledge bases. Drawing on the evolutionary theory and the dynamic capabilities view, we theorize historical trajectories as manifestations of purposive-rational actions by firms to transform their knowledge bases, which are accumulated from past technological search and tend to settle into stable and self-reinforcing patterns. At the firm-dyad level, to account for the multifaceted nature of search, we further dimensionalize technological convergence and differentiate the effects of exploration convergence, exploitation convergence and mixed convergence on alliance formation. We test our predictions on a sample of horizontal alliances in the U.S. semiconductor industry, showing clear and robust evidence that technological convergence exerts a strong influence on alliance formation, above and beyond the nonlinear effect of technological overlap that has been commonly reported in the literature.